Diversion in the Pharmaceuticals Market


The opioid crisis in the United States has been described as an epidemic requiring urgent action on the part of government, law enforcement, health advocates and other stakeholders. A substantial portion of overdose deaths result from opioids produced by reputable manufacturers for legitimate medical purposes that have been redirected to illegitimate use. This transfer of a legal substance to illegitimate or illicit use is known as diversion, and represents a major challenge in the pharmaceuticals supply chain.

Opioids, of course, are not the only drug products subject to diversion, though at present the containment of opioid diversion may be the most urgent. However, almost any pharmaceutical can be a target; for example, drugs for cancer therapy have been diverted to illicit sale, substituted with ineffective substances, thereby putting patients’ lives at greater risk. Products may also be diverted from markets where they are sold at a lower price point to ones where a higher price exists, thwarting, at a minimum, the manufacturer’s intentions, if not regulations in either or both markets.

This last example of diversion, in which sales of legitimate products are made in generally legal channels but contrary to the manufacturer’s intentions, creates a gray market for the goods in question. By contrast, products diverted through other means such as cargo theft or prescription shopping (frequently used to obtain opioid drugs) end up in the black market.

One end destination for diverted (and counterfeit) pharmaceuticals are on-line retailers.  Internet-hosted pharmacies have become a popular way for consumers to self-prescribe and procure medicines.  Unfortunately, these internet-hosted pharmacies often have diverted product, which may be expired, lacked proper temperature control and may be blended with completely fake medications.

Regardless of the ultimate fate of diverted products, track and trace technologies, enabled by serialization, can be an important line of detection. As serialized products are scanned at legitimate points in the supply chain, the data gathered form a trail. This data can be analyzed to detect patterns, such as appearances in unexpected locations or the shipment of unusual quantities, based on past experience, to a particular region. Once suspicious patterns are detected, companies can take appropriate action, involving regulatory authorities if appropriate. Even if products disappear into the black or gray market, enough data may be gathered before then to spot an issue.

Even as technologies like blockchain emerge to provide new trusted transactions between trading partners, serialization will provide the foundation for product identification. The combination of these tools will allow stakeholders to advance the goal of a safer, more secure pharmaceutical supply chain.

Related: Our View: Counterfeiting and the Gray Market